maximum and minimum prices. Volatility in the market causes the price to
jump,

drawing peaks and troughs forming the channel in the direction of the
trend.

Early identification of a channel can give valuable information about the trend
direction which allows traders to take advantage. In this trading system we will use the Equidistant Channel to determine the direction in which we will be looking to enter
trades.

HOW TO DRAW AN EQUIDISTANT
CHANNEL:

To draw the equidistant channel using the MT4 platform simply click on Insert.
From the menu click on Channel then select Equidistant from the submenu. See image below:

Once you have selected the Equidistant Channel drawing tool, you may begin
drawing

the channel on your chart. Click the left mouse button on your starting point on
the

chart.

Hold the mouse button down and draw the channel in the necessary direction.
Once

you have reached the end point release the mouse button and the channel will
appear

on the chart. You can now select the parallel line and drag it to the most
extreme high or

low point depending on the direction of the channel. The direction in which you
draw the

channel depends on wheher the candles are going higher or going
lower.

EXAMPLES:

On the image below you can see that from Point A onwards the new candles
being

formed are getting higher. This currency pair is in an upward trend so in this
case we

draw an equidistant channel by connecting the most extreme
Lows.

On the image above the most extreme Lows are at Point A and Point B. To draw
a

channel we simply select the drawing tool, then click the left mouse button at
Point A,

hold it down and drag it all the way up to Point B then release the
button.

At this point the parallel line will be inserted on the chart at any random
position. We

need to left click on the parallel line, hold the mouse button down and drag it
to the most

extreme High. On the chart above, the most extreme High is at Point
C.

Now that we have drawn the channel on our charts we can clearly see that the
market is

in an uptrend. This means that we will only be looking for opportunities to enter
Buy

trades.

NOTE:The Equidistant Channel only shows us the direction in which the market is

moving. Before entering a trade we must confirm the trend direction
using the MACD

indicator then we can use the Bollinger Bands to determine exactly
where to enter a

Buy trade. We will cover these steps in more detail in this
report.

On the image below you can see that from Point A onwards the new
candles being

formed are getting lower. This currency pair is in a downward trend so in this
case we

draw an equidistant channel by connecting the most extreme
Highs.

RULES FOR SELL TRADES:

1. The market must be in a downtrend. If new candles being formed on the
chart

are getting lower, the currency is in a downward trend so we draw an
equidistant

channel by connecting the most extreme Highs. After drawing the channel,
click

on the parallel line, hold the mouse button down and drag it to the most
extreme

Low to complete the channel.

2. MACD must be below the zero line.

3. If the first two conditions are met, wait for price to break through and close
below

the Lower Bollinger Band then open a Sell trade.

4. Place a Take Profit of between 3-30 pips depending on the time
frame.

5. Place a Stop Loss a few pips away from the most recent High or observe
a

mental Stop Loss if you prefer.

NOTE:As an alternative, you may also choose to place a Stop Loss or exit the

trade manually when the price crosses above the Middle or Upper
Bollinger

Bands or when price crosses above the upper Channel
line.

Let’s take a closer look at an example of a Sell Trade:

As you can see, after Point A, the new candles being formed are heading
downwards

suggesting that the market is in a downward trend. We then drew an
Equidistant

Channel by joining the most extreme Highs from Point A to Point
B.

Once the Channel appeared on the chart, we moved the parallel line to Point C
to

complete the channel. As you can see the Channel is moving downwards. To
confirm

the down trend, we look to the MACD and see that it is below the zero
line.

We now have confirmation of a down trend so we are looking for potential sell
trade

signal from the Bollinger Bands.

At the red, dashed vertical line, you can see that the price breaks through and
then

closes below the lower Bollinger Band. We then opened a Sell trade shown by
the